Bill on politicians' pensions fails Arizona Senate

PHOENIX -- A bill supported by top Republican legislative leaders that
would replace pensions for new judges and other elected officials with a
401(k)-style retirement plan failed in the Arizona Senate on Tuesday.

Senate President Andy Biggs, however, said four Republicans were absent, and he
believes the bill will eventually pass.

The House has already voted to eliminate the pensions, but amendments will
require another vote if it passes the Senate on reconsideration.

The bill is supported by Biggs and GOP House Speaker Andy Tobin and targets the
smallest and most underfunded of the state's four public employee pension plans.

The Elected Officials Retirement Plan, known as EORP, has only enough assets to
cover about 58 percent of its liabilities. It also has more retirees and their
survivors drawing benefits than active members paying into the system, 992 to
845.

The bill was defeated in the Senate on a 12-12 vote with four Republicans and
two Democrats absent.

If it becomes law House Bill 2608 only applies to new elected officials, but
the state will have to continue paying from $3 million to $5 million a year into
the system to make it whole as current members retire and begin drawing
pensions, Biggs said.

``EORP is unsustainable as it is,'' Biggs said. ``It's the ultimate Ponzi
scheme, and this is an effort to try to move to something that's sustainable.''

The plan has about $356 million in assets and $610 million in liabilities and
the state contribution has gone from about 6 percent of salaries in 1999 to 39
percent today. A legislative effort to cut cost-of-living increases is being
challenged in court.

The plan covers state legislators, elected officials at the state and county
level and some city officials as well as most judges. One of the problems is
that pensions are based on the person's highest salary even if they only earned
a small fraction of that amount earlier in their career.

Democrats oppose the bill, arguing that the state's other three retirement
plans are in the cross-hairs if the EORP closure passes.

``I'm concerned that it's opening the door,'' said Sen. Linda Lopez, D-Tucson.
``This is kind of like the camel's nose under the tent, so to speak.''

The judge's association agreed that the plan was unsustainable, and tried to
get the bill amended to allow elected officials to sign up for the Arizona State
Retirement System, the biggest state pension plan.

They mostly failed in that effort. They did manage to get an increase in the
proposed state match to a 401(k)-style defined-contribution plan, from 5 percent
to 6 percent of earnings, lobbyist Pete Dunn said. And they were able to insert
a provision allowing new state or other employees who currently are in ASRS to
stay in the plan when they become judges. The association agreed not to oppose
the bill with the changes.

Sen. Steve Yarbrough, R-Chandler, urged passage, saying it could start a
nationwide trend to end public pensions.

``Perhaps this bill, replacing a defined-benefit plan for elected officials
with a defined-contribution plan, will be the spark that lights a needed fire
across America,'' Yarbrough said.